A Bank of Japan official has ruled out the launch of a central bank digital currency because to do so would require the country to abandon cash.
Oxfam issued tap-and-pay cards loaded with $50 worth of DAI to 200 Vanuatu citizens to use via Sempo’s payment platform, following six weeks of direct consultation with villagers.
Throughout May 2019, United Kingdom-based nonprofit organization Oxfam International executed a month-long trial that saw MakerDAO’s DAI stablecoin distributed as a means of exchange among citizens of Vanuatu. The Oxfam initiative, named UnBlocked Cash, was conducted in partnership with MakerDAO, ConsenSys and Australian tech startup Sempo. The Australian government also supported the program.
Tsunamis, cyclones and volcanic eruptions comprise a constant concern for the citizens of Vanuatu, with WorldRiskReport describing it as the world’s most at-risk nation to natural disaster for five consecutive years. The month-long program saw 200 residents of the Vanuatu villages of Pango and Mele Maat issued tap-and-pay cards loaded with roughly 4,000 Vanuatu vatu (approximately $50) worth of MakerDao’s DAI stablecoin.
Local vendors who agreed to participate in UnBlocked Cash were provided with Android smartphones with an app facilitating the processing of DAI payments. The vendors were also able to convert DAI into fiat currency through Sempo‘s cryptocurrency exchange or any other platform, if desired. In total, 34 vendors participated in UnBlocked Cash, including local stores and schools.
Approximately 2,000 transactions were recorded during the pilot. Due to privacy concerns, an individual’s purchases were not tracked. However, the program recorded the general category of purchases — such as “medicine,” “food” or “bills.” During May, 5% of all new DAI addresses were created by the citizens of Vanuatu.
Cash trumps in-kind provisions
According to Australian media outlet Micky, contemporary research indicates that providing aid in the form of a liquid means of exchange is significantly more effective than giving in-kind support, such as food and other basic provisions.
The publication approximates that roughly “70 percent of Syrian refugees have been forced to sell in-kind donations for cash so they can buy the items that actually need to suit their personal circumstances.” The provision of cash also serves to encourage local economic activity.
Sandra Uwantege Hart, the head of Oxfam’s Pacific Cash & Livelihoods in Vanuatu, told Cointelegraph that “Oxfam was already managing a portfolio of activities designed to scale cash transfers as a means of delivering disaster assistance across the Pacific region” as early as 2017. She continued:
“Typically, cash transfers are much more efficient than providing goods as a form of aid relief, but they are also slow to set up and often bogged down by lengthy financial reconciliation processes and slow monitoring and reporting, which is often difficult for donors to verify. We saw the potential for higher transparency, rapid analytics and automated transaction tracking typical of blockchain solutions as a vehicle to improve and accelerate our cash transfer programs and ultimately make them more responsive to people’s needs.”
According to Hart, it took Oxfam “a while to find the right tech provider to get this solution off the ground before settling on Sempo through an RFP process. Sempo stood out from the pack as one of the only tech providers who fully understood both sides of the equation we were trying to solve — how cash transfers work, and how to design blockchain solutions in a local context-adapted way to make them work for the people who need them the most.”
Sempo’s platform operates offline
Speaking to Cointelegraph, Sempo’s Melanie Hardman described that the platform’s mission is to solve the challenges encountered by both vendors and customers who seek to conduct trade in periods of crisis. Hardman said:
“Our platform consists of: an app used by vendors as a ‘point of sale’ platform, an e-voucher or ‘tap and go’ card which hold a balance of funds and is used by recipients to make purchases, and a dashboard managed by the Oxfam team, where they can enroll and approve program participants, disburse funds and monitor transactions.”
The platform is able to continue operating offline by “cryptographically recording recipient’s balances on tap-to-pay smart cards, which are then synced at a later point.” The platform also does not require recipients to have access to a mobile phone and does not require users to undergo Know Your Customer (KYC) identification checks, which Hardman described as “critical,” given that many people living in the developing world lack identity documentation.
In late 2018, Sempo used its platform to deliver cash aid to refugees based in the Greek city of Athens, Iraqi Kurdistan, as well as Beirut and Akkar in Lebanon. According to Sempo, the programs saw the “creation of a digital credit transfer platform that is easy for both vendors and recipients to use, regardless of literacy and existing levels of financial inclusion.” The company also noted that it was able to increase the transparency of the program by leveraging distributed ledger technology.
Stablecoin issuance as cash aid
Sempo’s Nick Williams told Cointelegraph that MakerDAO and Sempo developed a process for UnBlocked Cash that distributed DAI-backed digital vouchers, which were redeemable for fiat currency, to Vanuatu citizens.
“Dai was used as collateral for a special e-voucher, which means that vendors can be reimbursed by anyone who meets the regulatory requirements of the Vanuatu Government. This gives the platform capacity for much lower cost overheads, as well as creating the foundations for open financial ecosystems in the communities that need them.”
Greg DiPrisco, head of business development for the Maker Foundation, told Cointelegraph that “Sempo was convinced that Dai was the best solution for their needs and thus went through the proper channels to ensure that they could use it in the pilot.” DiPrisco described the initiative as “a testament to the power of a decentralized stablecoin to empower disenfranchised populations.”
Sempo’s Hardman stated that the company was selected by Oxfam to provide its cash transfer platform technology for the Unblocked Cash pilot following year-long discussions between the two entities regarding “the potential to revolutionize the cash transfer space using blockchain.” Hardman continued:
“Sempo was invited to put forward a proposal by Oxfam as part of their RFP process. This involved Sempo presenting an initial presentation on our work to date, and then developing and submitting a proposal, which we did in partnership with ConsenSys.”
Claudio Lisco, strategic initiatives lead at ConsenSys, told Cointelegraph that the company was engaged by Oxfam alongside Sempo “to assess the time, cost and quality of digital cash based transfer programs” after the nonprofit became aware that ConsenSys had built a financial inclusion platform in conjunction with the Union Bank of the Philippines, titled Project i2i. Lisco stated:
“ConsenSys aided in the initial design of the pilot, provided blockchain advisory and communications support, and evaluated the pilot to make recommendations for future utilization and scaling potential. We were on the ground during the pilot, to document and collect data insights, and conducted interviews and filming. We are now producing the debrief report, video case study, and advising on future developments and how iterations of the cash transfer program can be scaled.”
Pilot program seen as success
While Sempo and ConsenSys will meet with Oxfam during the final week of June to discuss the pilot’s findings — and whether there is potential to employ the program at scale in Vanuatu and other regions — representatives of the entities involved indicate that the program was seen as a success.
Oxfam’s Hart stated that Oxfam’s previous cash assistance programs in Vanuatu involved a setup process that “took between 30 minutes and an hour of long lines and verifying paper lists.” According to Sempo’s Hardman:
“Within the pilot, enrolment times were reduced between communities from 5.4 minutes to 3.6 minutes, demonstrating significant time savings when compared with other cash transfer modalities, where recipients may have to attend a registration session, return at another time to verify their identity, and then travel to collect a cheque.”
Hart concluded that there were significant gains in the speed with which Oxfam was able to pay vendors, emphasizing meaningful participation on the part of many small, community-level merchants, who rarely take part in assistance programs due to typically being unable to wait weeks to be paid. Hart explained:
“Now, with weekly payments, virtually all vendors in this trial were small scale and community based, and located within walking distance for most recipients — this means that we are enabling small-scale community economic recovery that is more inclusive and better adapted to people’s purchasing habits.”
Pilot program produces “unprecedented” transparency
Transparency has long comprised a fundamental value proposition put forward by cryptocurrency, with the UnBlocked Cash pilot demonstrating the advantages digital currencies offer over opaque means for distributing public finance. Hardman stated that the initiative “provided high levels of transparency for Oxfam and their donor, the Australian Government, as administrators were able to see transaction data in real time both on the Sempo dashboard, and the public blockchain.”
Hardman also reported that Vanuatu community members indicated that Sempo’s platform would be the preferred modality of aid issuance in future disaster scenarios, attributing such to the greater ease of use afforded to recipients when compared with other forms of cash aid. However, she also noted, on reflection, that Sempo would like to see the platform’s offline data reporting functionality strengthened in order to improve monitoring.
ConsenSys’ Lisco described the program as showcasing the unique value propositions of cryptocurrency technology, concluding that Sempo’s platform offered significant efficiency advantages over cash, checks and other traditional methods for distributing financial aid. He continued:
“The pilot demonstrated that direct donations (without any intermediaries or administration) are possible utilizing Ethereum-based stablecoins. This method of transfer was also significantly cheaper for small donations. For instance, bank transfers to Vanuatu from Australia cost approximately $20 AUD. An Ethereum transaction, by contrast, averages less than 10 cents in AUD.“
Oxfam “highly likely” to continuing using stablecoins to distribute aid
Moving forward, Hart indicated that Oxfam is currently in the process of compiling reports aimed at showcasing the UnBlocked Cash initiative, and that it will “seek out the resources to be able to plan longer-term, and look at how we scale up this innovation in the Pacific, and elsewhere.”
Joshua Hallwright, Oxfam Australia’s humanitarian lead, told Cointelegraph that it is “highly likely that Oxfam will use stablecoins or other distributed ledger technologies to provide cash aid in disaster responses in the future, either in Vanuatu or elsewhere.”
Hallwright noted that “Oxfam is exploring the use of distributed ledger technologies because of their potential to change power dynamics and address inequities,” adding:
“As DLTs become ever more present in society, Oxfam is engaging in their development and impact in line with our goals of eliminating poverty and reducing inequalities. Oxfam is currently piloting six different uses of DLTs, globally, and sees these pilots as producing important insights that will shape future DLT applications in crisis responses and more broadly in emerging economies.”
The program showcases the potential of cryptocurrencies to facilitate far greater efficiency in the provision of resources, especially within the developing world and in response to crisis formulation. It is also good to hear that more such trials may take place, which could lead to a wide-scale adoption of crypto in the disaster relief sector.
Findings from the Congressional Research Service coincided with a senator’s call to ban cryptocurrency outright.
As part of an investigation into cash usage in the U.S., the report, dubbed “The Potential Decline of Cash Usage and Related Implications,” appears to forecast a reduction in paper money as contactless card payments increase.
Researchers also analyzed other forms of payment, including cryptocurrency, be it public, private or issued by a central bank.
Taking bitcoin as its prime example, the CRS nonetheless draws conclusions which have become commonplace among government sources.
“Although price data on Bitcoin illustrates the public interest in and overall demand for this cryptocurrency, it is a poor indicator of how often it is being exchanged for goods and services (i.e., how often it is being used as money),” the report reads. It continues:
“Certain analyses appear to show that digital currencies are not being widely used and accepted as payment for goods and services, but rather as investment vehicles.”
As Cointelegraph reported, analysis from software company DataLight last month painted an entirely different picture, claiming bitcoin was already poised to usurp both cash and card payments worldwide. All that is needed, its authors wrote, is for bitcoin’s development to continue in its current vein.
“If it maintains this pace, in another 10 years, it will surpass all competition,” they summarized.
Others remain less convinced, with entrepreneur and serial gold supporter Peter Schiff extensively examining bitcoin’s future potential as money with “The Bitcoin Standard” author, Saifedean Ammous, in an online debate last week.
A day before the CRS report’s publication, meanwhile, U.S. senator Brad Sherman called on Washington to ban cryptocurrency altogether over fears it contributed to the undermining of U.S. political power.
Cryptocurrency enthusiasts should hodl their coin reserves as the IMF declares war on cash following negative interest rate proposals. If anything, this is the best time for people to turn to cryptocurrencies to help preserve their wealth.
Time To Hodl Your Cryptocurrencies
For people who are already in cryptocurrencies, this is the best time to preserve wealth in digital currencies, not fiat if reports from Weiss Ratings is anything to go by. Meanwhile, no-coiners should be urged to ramp up, even if it means owning a percentage of a coin simply because saving is no longer a safe, more so if we draw events from devastated Venezuela.
According Weiss, the International Monetary Fund did declare war on cash following proposals to implement negative interest rates. In their tweet, Weiss Ratings says:
“The #IMF is the latest financial institution to declare war on cash. If they succeed, your fiat savings will go up in a puff of zero interest rate policies. This is why #crypto. #thisIsWhyWeHODL”
Negative interest functions in such a way central banks reduce interest rates with the aim of boosting economic growth. This move could see central banks reduce interest rates to negative figures. Undoubtedly, it implies that people would lose money through inflation as the government resort to stimulus in order to spur consumption and investment in an otherwise frail economy. By printing more to increase lending, boost demand, and stimulate the economy, the idea is to get people to spend instead of saving as this would help boost economies by decreasing interest rates but at the expense of high inflation.
The IMF, in a blog post earlier this year, suggests that one way to make negative interest rate work is to phase out cash. However, this effort could be arduous as paper money continues to be an integral part of payment processes in most countries.
Cash And Digital Currencies Could Work Together
The proposal by the IMF is for central banks to split their monetary base into two local currencies, cash and digital currencies (e-money). The digital currencies would be issued electronically and would have the policy rate of interest. Meanwhile, the paper cash would have an exchange rate against the digital currency.
There have been interest from some central banks across the world in developing digital currencies known as CBDC. The Central Bank Issued Digital Currencies (CBDC) would not work like cryptocurrencies. Instead, they would work like regular fiat currencies since they would be in the control of the central banks.
Reports over the past few months suggest that Sweden’s central bank is currently working on developing e-krona, the digital version of its local currency, the Krona. There are other countries that are exploiting similar moves, but no one has put together one yet.
Regardless, saving your funds in cryptocurrencies seems like the best move at the moment. After all, the primary goal of Bitcoin was to take away financial control from the government and hand it over to the people. Specifically, Satoshi wants to avoid the calamities that took place following the 2008 global financial crisis.
If the negative interest rate gets a nod and countries follow the IMF lead, then it would significantly affect a large swathe of world’s population already struggling with hyperinflation or deflation. Therefore, to protect your funds from bank negative rate charges, resorting to cryptocurrencies is no brainer. Encouragingly, indicators show that Bitcoin and other cryptos are gradually gaining traction, becoming an excellent store of value as data from Venezuela and Iran shows.
The post Hodl, IMF Now Declaring War on Cash After Negative Interest Rate Proposals appeared first on Ethereum World News.
Part of what has cemented cryptocurrencies on the map since they exploded into the mainstream investor market has been their volatility. Investors flooded to the likes of Bitcoin when, through November and December 2018, the value of the cryptocurrency increased in value exponentially.
The cryptocurrency market has also felt the ill effects of Bitcoin’s volatility because as a result of the price drops, Bitcoin’s trading volume, and even interest in the digital currency realm also decreases. The danger is that volatility can cause a large exodus of investors to occur which severely dents the hopes of other cryptocurrencies gaining mass adoption status.
Volatility should be at the center of attention if there is to be a future in which crypto is used widely in day-to-day instances.
However, it requires a lot of bravery, and some tactical know-how, to successfully navigate the lows, in order to keep oneself safe, and sane, as well as contribute positively to a burgeoning crypto economy.
Why volatility is important, but deadly
There is a lot to be said for the role that volatility played in helping cryptocurrencies reach the mainstream market.
Cryptocurrencies, and Bitcoin in particular, only made it into the mainstream media stream as a tool of the dark web when the infamous Silk Road was shut down. Back then, it was far from being considered a good investment for Wall Street types, but they soon joined the party.
Suddenly, banks, the thought leaders of banking and financial institutions all had an opinion on Bitcoin – many of them thought it was a fad, or even rat poison and far too volatile to take seriously, but conversations about Bitcoin were starting to be held in investment circles.
The Chicago Board Options Exchange (CBOE), and the Chicago Mercantile Exchange (CME) introduced Bitcoin futures trading on the 18th and 10th of December 2018 respectively. Goldman Sachs and Barclays are rumoured to be looking into crypto trading desks, and people could not get enough of this crazy asset that could double in price in a matter of weeks.
This is why volatility was so important in establishing cryptocurrencies as a potential asset that could also be adopted as a currency in mainstream society. However, this same volatility is also what could kill that goal.
Itai Cohen, CEO of Homelend, a mortgage crowdfunding platform has noted to Cointelegraph that within their scope of property and mortgaging, they see volatility as something that drives investors away from the cryptocurrency market and into more stable investments such as the housing market. Their aim is to try and transcend the cautious housing investors while catering to a new, bolder investor who embraces this volatility.
“The high volatility of crypto-assets is the result of investors’ reliance on the so called ‘adoption syndrome’ – where the perception of an asset’s value is mostly based on expectations about its adoption by the community.”
“I believe that this is a key factor, more so because perceptions are much more volatile for a digital asset than for ‘real-world’ assets like gold, real estate, corporate profits or government backed currencies. In other words, there is a big gap between the physical world and the digital one.
“The mortgage industry is a perfect example of an industry that seems to be helping bridge the gaps, same as the real estate industry or any other industry that has a foothold in the ‘real’ world.”
The problem is, if people enter crypto when the market is at its most Bullish, profiting off the upward volatility, they need to be strong enough to stomach it at its most Bearish, and the volatility takes a big down swing.
How to handle volatility
Handling volatility is nothing new for institutionalized investors. Assets, stocks, bonds, and even forex is prone to swings, but the problem is that cryptocurrency volatility is off the charts.
Additionally, investors in cryptocurrency are often new to the game and have not experienced the range of swings before – watching their money both grow, and shrink substantially by the hour.
As the stock market having been around far longer than the cryptocurrency one, it is a good place to begin. Their tips in handling these sickening lows, and highs, are relevant and can be carried across to crypto trading.
Just like in the cryptocurrency space, there are long term investments and short term investments in the stock market. Roger Ma, founder at Lifelaidout, a certified financial planning company in New York, explained how, in stocks, it is important to not forget about your time horizon:
“Investing in stocks rewards you in the long term. These day-to-day changes in the market shouldn’t affect you.”
This reflects very much in the same vein as the so-called ‘Hodl’ strategy for cryptocurrencies. Essentially, the strategy says that there is no need to let ‘day-to-day changes affect you’ rather just hold onto your cryptocurrency to avoid the volatility altogether.
Ma also mentions another strategy which shares similarities with cryptocurrency – dollar cost averaging. Under this strategy, you buy an investment on a fixed schedule. This investment strategy essentially stops you from making rash moves into, and out of, the marketplace.
“As long as you have a good plan in place and have thought about the time horizons where you need the money, then the slightly small moves in the market shouldn’t matter to you.”
The Dow Jones has been known for its big drops, even over the course of just one day. Scott Hanson, founder and senior partner at Hanson McClain Advisors, made an important note on these kinds of drops.
“A 250-point drop for the Dow today is only about a one percent decline. But that same drop when the Dow was at 10,000 would have been a 2.5 percent fall.”
This basically speaks out about the bigger picture, and how important it is to zoom out of the charts. For Bitcoin, just six months ago, in October 2017, people were celebrating wildly that Bitcoin had broken the $6,000 mark. However, a few times already this year, people were panicking that Bitcoin would hit $6,000.
There are times however, when even seasoned investors in crypto feel the pinch and want to either take profit, or a high, and escape the market. But, escaping the market for an investor is difficult if that money is designated for assets.
Many have seen value in diversifying their portfolios, not only across cryptocurrencies, but also hedging their bets with some more stable assets, primarily gold.
Gold is an asset that is almost synonymous with stability, and, it has a long running history with cryptocurrency as its antithesis. There have been times where it is apparent that gold and cryptocurrencies have inverse relationships with the precious metal speaking in times of crypto lows.
Daniel Marburger, director of Europe-based online gold dealer Coin Invest said that gold coin sales increased fivefold on Jan.16, the same time cryptocurrencies were crashing.
“[Tuesday] was a hell of a crazy day,” Marburger said, adding that “emails and phones did not stand still with customers asking how they could turn their crypto into gold.”
Even before cryptocurrencies, gold was known to spike in times of stock market volatility as its value tends not to move in line with other assets such as equities or property.
Cash is another safehaven that crypto investors easily flock to when the cryptocurrency market takes a dive, as it is as simple as selling the digital currency for something that is at least usable in day-to-day life.
The issue with turning digital currency to cash is that the value of cash is constantly shifting but slowly, losing value, and as an investable asset, it really is not a good bet.
Similarly, as a safe haven for cryptocurrency the problem is that a dreaded cycle of selling low and buying high can develop as investors sell their assets in times of lows, and buy them back when the market is booming again, and probably, over valued.
Image source: U.S Bureau of Labour Statistics
Bonds issued by governments are generally perceived as safe haven investments because the general view is that countries are often more financially secure than companies, and more stable than cryptocurrency. However, if the bond issuer can’t meet interest payments or repay the capital when it’s due, you could lose your whole investment, and it has happened before, even in economies as big as China’s.
All of these safe havens primarily have ways in which a crypto investor can escape the volatility of the market and protect their assets from falling to far. However, the primary issue is that they are taking their investment totally out of the crypto economy, and with the volatility, it is often hard to get back in, and profit, when the markets are green.
Guy Melamed, CEO of Zeex, a company that tries to mitigate crypto volatility by turning them into things such as gift cards, reiterates the point that by leaving the cryptomarket totally in search of a safe haven means that there is a gamble about getting back in when the time is right.
“Even though top cryptocurrencies such as Bitcoin and Ethereum have made tremendous progress within the last few years, the latest dips in the market have had many investors understandably looking for safe havens where they can park their wealth without dropping out of the crypto market.”
“Many will turn to conventional safe havens like gold, stable-coins and exchange-traded funds. But it’s hard to buy low when the whole herd is stampeding in the same direction. What we’ve found in our work, is that inflation tracking crypto gift cards can be stable because they are linked to inflation and not speculation.”
A duty to weather the storm
There is evidence to suggest the volatility of Bitcoin is lessening, that the wild swings are not as wild, and that they are in fact getting more manageable over time. This has a lot to do with the rise in adoption and the distribution of Bitcoin across a vast and varied market.
On the other side of things, volatility is also sometimes prized. Arthur Hayes, the CEO of BitMEX, a Bitcoin mercantile exchange, trades in volatility and sees it as important to the space.
“I am a volatility trader at the end of the day,” Hayes said. “We make our money if it is volatile. If it goes up or it goes down, if you have Bill Gates calling it a fraud, then short it – I don’t care. Or, if you think it is going to be one mln dollars in a few months, great! Buy it, still don’t care, we just match trades.”
But, according to Daniele Bernardi, the founder of the PHI Token and researcher on cryptocurrencies, volatility is lessening, and it is because not everyone is after that ‘three-digit return’.
“The extreme volatility that characterizes the cryptoworld today is clearly linked to the very high yields they have generated in recent years. If we want the crypto to continue to offer triple-digit returns as an asset class, it is inevitable that volatility must remain high. Even if the same is also linked to liquidity, for which the crypto community will inevitably grow the more we will mitigate the returns to the volatility, Bernardi told Cointelegraph.”
“This is already happening, because the volatility of Bitcoin in the first years of life was more than 300 percent per year, while now it varies between 50 and 100 percent per year. Currently there are no asset classes that have similar volatility except for the volatility of the VIX index which is a volatility indicator in turn.”
It requires those who are invested in Bitcoin, and other cryptocurrencies, to stick with it and work through the volatility in order for the digital currencies to survive, and thrive.
Mainstream adoption has kicked off in earnest, but it requires a lot of hard work from those who are in the market now, to stay in it, and to ride out this storm. Once the volatility is under control, a new wave of adoption can surely kick off.
South Korea’s central bank, the Bank of Korea (BOK), has recently announced it is considering cryptocurrencies and blockchain applications for its project for a “cashless society,” local news TokenPost reports May 1.
South Korea’s central bank says cryptocurrency and blockchain will allow societies to become coinless.
The South Korean gov’t has been trying to get rid of coins for a long time, many methods have been suggested but it wants to go with cryptocurrency.https://t.co/k8DNdinbl9
— Joseph Young (@iamjosephyoung) May 1, 2018
According to TokenPost, BOK announced the official launch of its cash-free society pilot in its “2017 Payment Report” yesterday. The report mentioned that the bank has started exploring possible uses of blockchain and cryptocurrency, such as applying blockchains and passwords to payments.
The bank has also established an organization for researching digital currency and analyzing possible effects of cryptographic money on the overall financial system.
The major goals of the project are customer convenience and reducing the cost of producing physical currency. In 2016, South Korea reportedly spent KRW 53.7 bln ($47 mln) on issuing physical currency.
The government also plans to use the initiative as a means by which to open the underground economy, which is mostly cash-driven. Kwak Hyun-soo, an analyst at Shinhan Investment Corp said:
“It can open the underground economy, and thus enhance equivalence in taxation. The shoe box full of 50,000 won banknotes that you see in movies will disappear in reality (with the advancement of a cashless society).”
According to KoreaTimes, the South Korean government began considering phasing out physical money in 2016, and planned to become a “cash-free society” by 2020. In April 2017, the BOK launched a coinless society trial, in which customers could deposit small change from transactions and put them on a prepaid or mobile card to use at convenience stores, discount stores, and department stores.
In January, inter-ministerial division on cryptocurrency policy confused the South Korean public when the Ministry of Justice independently declared it would ban cryptocurrency trading. Following a petition, the Minister of Finance said that the government would not ban crypto trading, which was eventually confirmed by the Minister of the Office for Government Policy Coordination in February.
Last week, Cointelegraph reported that South Korea’s largest crypto exchange Bithumb is pushing for the adoption of digital currencies in the country. The exchange aims to evolve into a bank-like business in order to make the use of cryptocurrency in daily life more intuitive.
In a Reddit AMA, technology visionary Bill Gates lost a lot of fans when he gave his opinion on Bitcoin, honing in on a pretty weak argument for its use. It’s “used for buying fentanyl and other drugs, so it is a rare technology that has caused deaths in a fairly direct way,” Gates expressed.
But, Bill, drugs have been around for much longer than Bitcoin has, and people have been buying them for centuries, so how ever did they manage before this digital currency came along?
Blaming a tool for its unintended use is quite foolish. Yes, drugs can be bought with Bitcoin, as can life-saving medical procedures. You see, this digital currency is just that, a currency, like US Dollars, Nigerian Naira, Thai Baht and Russian Ruble, all which are equally adept at buying drugs.
There was a time where because of circumstances, Bitcoin was used often for buying of illegal substances, from drugs to guns and even hitmen. This all resulted from dark web marketplaces such as the infamous Silk Road.
Bitcoin was the currency choice on the Dark web, as it had many attributes that suited this shady underworld. It was decentralized, anonymous and digital. Bitcoin was thus the only way people could buy these illegal substances – on this marketplace.
Bitcoin was still quite unknown, and a very small fish in terms of its market cap and in comparison to any other currency, asset or market. But during this period, its primary use was probably for illegal activities.
But, as Bitcoin has organically grown and been adopted into more mainstream markets, the use of the digital currency as a Darknet staple has been declining. There is empirical evidence that Bitcoin, itself, is falling out of favor as a currency on the darknet, but statistically, mainstream adoption means less “criminals” are holding and spending Bitcoin.
What the numbers say
In a recent paper published in January this year at the University of Sydney Business School, some numbers were quantified when it comes to Bitcoin buying and illegal activities.
“We find that illegal activity accounts for a substantial proportion of the users and trading activity
in Bitcoin,” the paper reads. “For example, approximately one-quarter of all users, 25 percent, and close to one-half of Bitcoin transactions, 44 percent, are associated with illegal activity.”
“Furthermore, approximately one-fifth, 20 percent, of the total dollar value of transactions and approximately one-half of Bitcoin holdings, 51 percent, through time are associated with illegal activity.”
“These users annually conduct around 36 mln transactions, with a value of around $72 bln, and collectively hold around $8 bln worth of Bitcoin.”
Looking at these numbers, currently, there are almost 28.5 mln Bitcoin wallets that hold more than 0.001 BTC according to data compiled by Bitinfocharts.com.
However, most Bitcoin users have several wallets and use multiple wallet addresses to increase their financial privacy when transacting. Hence, the number of users is likely less than that number.
But to counter that, there will be a lot of inactive wallets, and a number of other factors that shift this number around. Therefore, it really comes down to an estimate, and hence, around 20 mln Bitcoin users globally can be considered as a fair estimate.
So, the numbers stand at five million users of Bitcoin have bought illegal goods with it. And 10 million illegal transactions happen annually. Additionally, just over half of the Bitcoin in circulation has been used for illegal activities.
These are big numbers, but when it comes to comparisons to other payment options, it starts to shine a light on just how small the Bitcoin drug trade is.
What about guns and murder?
Part of the fear that whirls around Bitcoin is that it was not only used for buying drugs but, especially when it came to the Silk Road, it was apparently a tool for purchasing weapons as well as hitmen.
However, the truth of the matter is that while guns could be purchased on the Silk Road, and with Bitcoin, they account for a very small portion of sales.
Nicolas Christin, assistant research professor of electrical and computer engineering at Carnegie Mellon University, is one of the researchers behind a recent deep-dive analysis of sales on 35 marketplaces from 2013 to early 2015.
“Weapons represent a very small portion of the overall trade on anonymous marketplaces.There is some trade, but it is pretty much negligible.”
Drugs are far more common. Specifically, MDMA and marijuana each account for about 25 percent of sales on the dark web, according to Christin’s research. But weapons are so uncommon that they were lumped into the “miscellaneous” category, along with drug paraphernalia, electronics, tobacco, Viagra, and steroids. Together those account for maybe three percent of sales.
Image source: www.andrew.cmu.edu
In comparison, albeit legal, gun purchases in the US alone account for a huge number of data with regards to background checks shows.
The figures show that there were 16,808,538 applications for gun licenses in 2012. If they were approved, that would be enough weapons to stock a member of NATO’s armed forces nearly five times over.
Traces of cocaine
To straightaway put this into context, the report from Sydney reads that half of Bitcoin has at some stage been used for illegal purchases. Then, a report conducted just on US Dollars, and relating just to cocaine, says that 90 percent of bills hold traces of the white powder.
In the same paper, which outlined the numbers for Bitcoin drug buying, another report is cited from the US White House Office of National Drug Control Policy that estimates the drug users in the United States, in 2010, spent around $100 bln annually on illicit drugs.
So in contrast, the initial report outlines that annually: “36 mln transactions, with a value of around $72 Billion” occur with Bitcoin, meaning that 44 percent of $72 bln – $31.6 bln – is spent annually, globally, on drugs.
Yet, in the US alone, in 2010, $100 bln was spent on drugs.
The vast majority of drug users still purchase illicit substances via more ‘traditional’ methods. According to a 2017 Global Drug Survey, regardless of country, less than half of drug users purchase substances via the dark web in any one country. The global median for a percentage of drug users who use the darknet is 10.1 percent.
Image source: www.globaldrugsurvey.com
No special guilt
The fact of the matter is Bitcoin is used for illegal activities and substances, but there should be no special guilt attached to it. It is a tool of the internet, and with online purchases, across all sectors, growing, it is unsurprising that this currency that only exists online comes into play.
Online payments are constantly growing as more and more people turn away from cash, with Sweden, the leader in becoming a cashless society. These online payments give the opportunity to people to buy goods and services online.
But, because credit and debit card purchases online for drugs and illegal goods are not possible, or certainly not smart, people look for other opportunities. The ease and convenience of buying online extends to the illegal markets, and just because there is a tool to do it with, doesn’t mean that the tool is the enemy.
Drugs are the enemy, and while they continue to exist, so will means to purchase them. Still, though, cash is king when it comes to drug purchasing, yet, there are no calls to ban the USD despite $100 bln worth contributing to the drug epidemic.
Jack Dorsey, CEO of San Francisco-based payment service Square, revealed the company’s plans to focus on developing increased options for Bitcoin (BTC) use in a conference call Tuesday, Feb. 27 with Market Watch.
Dorsey, who is also the CEO of Twitter, specifically discussed the company’s Cash App, which now allows all users to buy and sell Bitcoin, telling Market Watch:
“Bitcoin, for us, is not stopping at buying and selling. We do believe that this is a transformational technology for our industry, and we want to learn as quickly as possible.”
According to Square’s 2017 Q4 report, also published Feb. 27, the company’s total net revenue and adjusted revenue have significantly increased compared to Q3 of 2017. Specifically regarding Bitcoin use in Square’s Cash App, the report stated positively:
“Additionally, customers can now buy and sell Bitcoin in Cash App. We observed that this was a feature our customers wanted, and we support Bitcoin because we see it as a step in the long-term path toward greater financial access for all.”
Currently available in 50 US states, Cash App allows its users to carry out instant fiat transactions, free cash-outs, and instant Bitcoin buy/sell option, which was first launched for a limited part of users in November, 2017. On Jan. 31, Square released the Bitcoin buy/sell option to almost all users.
Earlier today, Cointelegraph reported that J.P. Morgan Chase released an annual report for 2017 to the US Securities and Exchange Commission (SEC) yesterday, Feb. 27, in which the company lists cryptocurrency as a “risk factor” for its future business.
The views and opinions expressed here are solely those of authors/contributors and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Over the last 24 hours, the crypto market has fallen by more than 30 percent. There is a combination of events that might have triggered it. Litecoin’s founder selling all his coins in this rally is certainly a sentiment breaker. This might look like he believes the elevated levels were a good position to cash out completely.
While his selling doesn’t end the future of Litecoin, it certainly dampens the sentiment and we can see it reflect on the other cryptocurrencies as well.
Elsewhere, a large individual trader or a group of traders placed an options bet on the New York-based digital currency trading platform LedgerX, that Bitcoin will rally above $50,000 by end-2018. Right now, it seems to be an overly optimistic assumption. However, anything can happen in a year’s time. If someone had told me in January 2017 that Bitcoin will climb close to $20,000 during the year, I would not have believed it.
Nonetheless, the bull market tops out when the sentiment is overly bullish, especially with the retail traders. Using the Wayback Machine, we find that the whales have been trimming their positions, while the smaller traders have been piling on Bitcoin over the period of the year. Professional’s selling is never a good sign.
Though in the past year, every fall has been a buying opportunity and the aggressive bulls have made a lot of money, we believe that, now, the traders should wait and not venture out to buy until we see some semblance of a support forming.
But won’t we miss out buying at lower levels?
We may! But, we will also sleep peacefully and enjoy the holidays without any major worry, should the cryptocurrencies extend their fall.
We have not traded in Bitcoin for a while because we did not get the right setup to enter. Though we missed out on a large uptrend, at least we did not get caught in the frenzy. To the lucky few who are owning Bitcoin, we have warned in our previous two analysis reports that the cryptocurrency is at a risk of breaking down.
In our previous analysis, we had warned that if Bitcoin failed to rise above the trendline, it will break below $15,200 and that is what happened. The attempt to rebound off $15,200 failed on Dec. 20 and today the cryptocurrency has plunged even below our expected support levels of $12,505.
We may find a number of aggressive bulls buy at the current levels of the BTC/USD pair and continue buying till the 50-day SMA of $11,000. However, we believe that we shouldn’t try to catch a falling knife. As the selling has been overdone, we may find a bounce soon, but, if it fails to sustain, it’ll break loose. We may see the fall extend to even $10,000 levels.
So, let’s wait for the correction to end before initiating any long positions.
The ETH/UDS pair has a strong support at $500 and below that at the 50-day SMA at $455. If these also don’t hold, then the price will fall to $400 levels.
We suggest waiting for a few days until Ethereum forms a bottom. Currently, there are no buy setups on it.
Traders who followed us on Bitcoin Cash entered long positions at $1,520 and exited 50 percent positions at a handsome profit of $3,859 and the remaining position was closed at $2,400, which was our trailing stop loss. Though our revised target objective was $4,514.5173, we recommended booking partial profits because Bitcoin Cash has a history of plunging from the highs.
The BCH/USD pair rose to a high of $4,139.0893 and reversed course. It has broken below the 20-day EMA and the 61.8 percent Fibonacci retracement levels of the rally from $1,145 to $4,139.0893.
We expect the cryptocurrency to find some support at the 78.6 percent retracement levels of $1,785.
However, this is only an expectation. We should take any fresh position only when Bitcoin Cash forms a bottom. Until then, we recommend staying on the sidelines.
In our previous analysis, we had forecast that Ripple will resume its uptrend once it breaks out of the pennant formation. Yesterday, the cryptocurrency broke out of the bullish pennant and skyrocketed higher.
The pattern target of the bullish formation breakout was $1.5 and yesterday, the XRP/USD pair rallied close to a high of $1.2.
However, today, it is being clobbered.
It is because of this possibility that we keep mentioning to trail the stops higher. As it has broken below the pennant formation, it has become negative. It is difficult to call a bottom, but it may find some support at the $0.6 mark.
Today, the cryptocurrency broke down of the lower end of the range. At one point, the fall had extended to $1.1.
In such a volatile environment, we would not like to venture out and buy. The sentiment is too negative. We shall wait for the selling to exhaust before initiating any buy position. It is useless to mention any support levels when traders are selling in a panic.
We had forecast a range bound movement between $243.86 and $370. While yesterday, the cryptocurrency bounced off the supports, it was not spared today.
Litecoin is currently at the 61.8 percent Fibonacci retracement level, which is a critical support for the LTC/USD pair. If this breaks, we can see the fall extend to the $146.414 levels, which is the 78.6 percent retracement of the rally.
We don’t want to be brave during a panic. We want to wait and watch for buying to emerge before initiating any position.
We expect a strong support at the trendline in, which is just below the 78.6 percent retracement level for the DASH/USD pair. We expect this level to hold.
However, we don’t recommend buying until the decline ends. The cryptocurrencies can easily overshoot on the downside.
Please note that after such a sharp fall, we are bound to see strong bounces on a few cryptocurrencies. However, we believe in safeguarding our capital first and investing with a calculated risk. With this philosophy, we miss many trades; however, we are less prone to drawdowns as well. At least, let’s enjoy the holidays without any stress.
*The market data is provided by Trading View.
The risks of environmental impact because of Bitcoin mining have been widely touted, but a recent report indicates that the actual damage from Bitcoin mining may well be far less than that associated with fiat currencies and other industries.
Data centers, gold mining and cash production all consume substantially more energy than Bitcoin mining.
The report indicates that the annual consumption of power from Bitcoin mining is 8.27 terawatt-hours per year, more than Ireland and other small nations. Nevertheless, this number is actually only an eighth of what data centers in the US consume annually, and the global production of fiat currencies stands at 11 terawatt-hours per year.
Gold mining burns a staggering 132 terawatt-hours per year. What’s more, these numbers don’t even include the massive amount spent on vaults, banks, security systems and more to keep the physical cash and precious metal safe.
The environmental impact of Bitcoin mining has been widely touted, particularly by those who believe it to be a non-legitimate currency, but it appears these accusations are more fear, uncertainty and doubt (FUD), rather than actual facts.
These reports do not take into consideration the actual costs of other types of value production, all of which consume resources. In point of fact, Bitcoin consumes less energy than its non-digital equivalents